Why Execution Is No Longer the Key to Competitive Advantage

Welcome to the IESE Business School audio series. This 3-minute podcast is based on a March 2018 webinar titled "Adaptive Companies: New Approaches to a Fast-Moving World."

ANTONIO DÁVILA:
For a long time, execution was the key to the competitive advantage. If you were able to execute better than your competitors, you were ahead of them. And the reason was that the environments were more or less stable: there weren't too many changes and companies that reached the top would stay there for a long time.

Now, that's changing dramatically: in the last 15 years, with a lot of new technologies and the globalization of markets, execution is not enough. It's a must, but it's not enough.

The future of competitive advantage, the way we see it, is becoming excellent at seeing what's coming up next. So, it's not only your ability to execute but your sensitivity to what's going on outside.

The concept that is underlying all this is what we call perceptual acuity, which is defined as the ability to sense what is coming before the fog clears. And, what's the idea here? The idea is that the future of competitive advantage is your ability to see what's coming up next and the ability to see what's coming up next depends on your observation capabilities as an organization.

Our organizations have been designed around processes, around metrics which are inward-looking. If we do this [i.e., keep our focus inward], we're going to miss the opportunities that are coming up from the outside.

Basically, there are two main messages here: the first one is that we need to change our cultures. So, we need to unlearn the 100 years' of learning that we've had about managing those processes. And then, instead of doing 95 percent inside and 5 percent outside, start doing, maybe, 80 percent inside / 20 percent outside or 70/30. And to do this, it's not going to happen because you decide so, but you need to start putting in place tools and management systems that will help you sense and interpret what's going on around there.

From my perspective, the routine of looking into the future should be something that goes together with the routine of looking inside. So, every month, if you do it monthly, that you review what's going on inside the organization, you should also devote time to what's going on outside. And you should have the data, and you should have the analysis, to understand not only the inside, but also the outside.

The second thing is: relying on the crowd. It's not going to be one or two people that can do this; it has to be all the people that you have in the organization that have unique experiences and unique set of skills. There are people that understand very well Asia, other people that understand very well Latin America, another group that understands very well artificial intelligence or blockchain or robotics or drones. So it's not just one person, or a small group of people, that can do this. It has to be a crowd effort.

What you end up creating is a very rich understanding of what's going on outside. And then, with this rich understanding, you can use different techniques with the idea of generating insights.

So, if you change your organization, and you start having this external perspective, with the right management tools, with the right processes, devoting time at least monthly to see what's going on out there, analyzing the data that is coming out from the external world, understanding the complexity through the maps, what's going to help you is, first of all, identifying emerging opportunities.

And finally, of course, if you spot disruptive opportunities, you can be the first to take advantage of those opportunities.